NationalACH

Here’s a list of the most common standard entry codes for ACH payment processing:

CCD-Corporate Credit or Debit-

This application can be either a credit or debit application where funds are either distributed or consolidated between corporate entities.

PPD-Prearranged Payment or Deposit-Direct Deposit-

Direct deposit is a credit application that transfers funds into a consumer’s account at the Receiving Depository Financial Institution. The funds being deposited can represent a variety of products, such as payroll, interest, pension, dividends, etc.

Preauthorized Bill Payment-

Companies with billing operations may participate in the ACH through the electronic transfer (direct debit) of bill payment entries. Through standing authorizations, the consumer grants the company authority to initiate periodic charges to his or her account as bills become due.

POS-Point of Sale Entry-

Point of sale debit applications, generally initiated by a buyer using a bank debit card.

RCK-Re-presented Check Entry-

Representment of a check that has been processed returned because of insufficient or uncollected funds.

TEL-Telephone-Initiated Entry-

Used for to accept ACH payments via phone using an oral authorization from the consumer.

WEB-Internet-Initiated Entry-

Used for internet transactions where authorization for the transaction is provided by the consumer online.

ARC-Accounts Receivable Entry-

Converts paper checks to electronic transactions.

ACH payments are a fast, inexpensive and reliable means of electronic funds transfer.  The ACH network has been one among the safest way of making payments since its inception over 35 years ago.

During the past year, the news has reported breaches of corporate and government accounts by cybercriminals, resulting in over $100 million in losses.  These breaches were not caused by lack of security within the ACH payments network.   Rather, the breaches resulted from either bank or corporate negligence or both.

In some cases, the banks did not have adequate security controls in place which allowed cybercriminals to hack into customer accounts.  In other situations, businesses or governments did not use the advanced control systems that were available through the banks.

Even though the ACH network is very safe, corporations and government agencies must secure payment transactions as much as possible.  They should implement all available security features such as debit blocks and filters to prevent unauthorized debits to accounts.

Banks must also due their part to secure payment processing transactions.   Banks should consistently require on multifactor authentication, layered security, and other controls designed to prevent security breaches.

Integration of electronic checks with a merchant website is easy.

The merchant receives an API (Application Program Interface) which integrates with the merchant’s website and is tied into “back-end” processing software.  Merchants systems communicate with the processing system using an XML/SOAP interface.

The API provides a secure connection through which on-line merchants submit transactions. Once the consumer enters payment information, transmissions are encrypted and sent through the secure ACH Network to the Federal Reserve Bank. There is an immediate record of who initiated the payment transmission and of the account that received the payment in accordance with the agreement and authorization between the customer and the business.

Merchants have a “dashboard” through which they can view transactions, create reports, and modify the parameters of the systems.  Online reporting is included free.  Merchants can search, sort, and track the status of any transaction.  A large variety of reports are readily available to provide data to management.

Echeck files are uploaded to be processed in batches.  Most merchants automate the procedure and no manual intervention is required.

Settlement of funds into the merchant’s depository account is generally 3 days for standard risk merchants, 7 days for high risk.

ACH stands for Automated Clearing House.  Since it began operations in the early1970s the ACH Network has been an electronic payments network used by individuals, businesses, financial institutions and government organizations.  The network is sometimes referred to as Electronic Funds Transfer (EFT).

The ACH network is a batch-oriented electronic funds transfer system governed by the NACHA Operating Rules which provide for interbank clearing of electronic payments for participating depository financial institutions. The Federal Reserve and Electronic Payments Network act as ACH Operators, central clearing facilities through which financial institutions transmit or receive ACH entries.

The ACH Network functions from beginning to end through a series of implied or explicit agreements with all participating Depository Financial Institutions (DFI) which agree to comply with the NACHA Operating Rules.  Inherent to this agreement is the DFI’s responsibility to assure that its customers follow procedures that complement the safety, soundness, and efficient functioning of the ACH Network.

Through the ACH Network, funds are electronically credited or debited to a company’s or individual’s deposit account.  These deposit accounts include checking, savings, loan and financial institution general ledger accounts.  Both funds and information may be exchanged between financial institutions on behalf of companies and individuals utilizing electronic payments, therefore providing better cash management capabilities.  Every ACH transaction is traceable. It is probably the one system in the country where not a dime has been misplaced and not found.

ACH transactions are transmitted with the following information: the account holder name, financial institution routing and account numbers, party initiating the transaction and the amount and date of the transaction.  Additional payment information may be sent with an ACH payment by using extended record formats called addenda.  Addenda may include accounting related information such as an invoice number or a shipping advice.

To protect your payment processing and your business, be careful who you trust.

Certainly businesses are fearful of attacks from the outside from cybercriminals.  But, in reality, many frauds are perpetrated by people working inside of the business.

Temptation looms large when employees discover an easy way to exploit the system.  The vast majority of people are inherently honest.  However, even the most morally righteous person can yield when faced by personal financial difficulties, dissatisfaction with the employer, or the thrill and excitement that can come from “getting away with it”.

Keep a good eye on the type of information that is available to your employees.  Be sure to have audit trails for every transaction.  Strong management oversight from different departments is also valuable.  Of course, be sure someone is watching the managers too.

The most obvious people that have access to customer information are the customer service representatives.  Yet, many other employees also are in situations where information theft easy.

Receptionists, mail room workers, administrative assistants, and purchasing agents, and security officers have availability to data.   In fact, anyone you employ can potentially be a thief.

Within your business, protect your customers’ information.  And, don’t forget to protect the financial information of your company which is equally valuable to fraudsters.

Visit NationalACH.com for more information on payment processing.

Electronic payment processing is continuing to expand within utility companies as more consumers are paying bills electronically rather than writing paper checks.  ACH payments have long been popular for utility bill payments.  ACH is a low cost method of accepting payments for utility companies, with fees of 20-30 cents or less per transaction.

Credit cards and debit cards are now increasingly popular as well.  The credit card companies have special rates for utility bill payments.  For example, new rates on utility payments would generate a flat $1.50 in interchange for a $200 transaction.  This replaced the old rates where the same payment would have cost $4.74.

Acquirers, who pay interchange to the issuing banks, decide whether or not to pass savings on to their utility clients.  Acquirers serving utilities make recommendations about what electronic transactions work best for unity companies.  But, of course, the acquirers are most interested in their own profit margins.

Utility companies would prefer that consumers set up recurring payment models.  Recurring payments are quite common for ACH payments.  But whether it’s a one-time payment or recurring, consumers are very comfortable paying utility bills with ACH.  Utility companies can accept payments online, over the phone, at walk-in bill-pay centers, or via written authorization for recurring billing for ACH.

The Federal Reserve has a new service beginning August 2nd called FedACH SameDay that permits same day settlement for certain ACH transactions.  This is the first significant change the Fed has made in settlement times for the ACH network in 37 years.

Banks can opt in as either originating or receiving institutions, or both.  But therein lies the problem for merchants.  Without universal banking participation, merchants won’t know when a particular transaction will clear since the buyers’ bank may or may not be a participant.

It would be much better if the banks were mandated to participate.  A change in rules to require universal banking participation would turbo charge use of ACH as a payment option for merchants.

Demands for faster funds availability are driving the payments marketplace.  In order for the ACH network to maintain position, it must offer fast settlement.

But a universal participation rule has to be passed and implemented by NACHA, the organization that regulates the ACH network.   NACHA has its work cut out for it, convincing thousands of participants in the ACH network to agree to the faster settlement.  Fast settlement is important for merchants but it may not a priority for many of the banks in the ACH network.

For the past 20 years predictions have been that the check is dead.  And yet, in 2010 paying by check is still very much alive.

As the younger generation matures, checks may disappear.  But, there is still a large demographic today that prefers to pay by check.

The preference for paying by check transfers to the internet merchant.  If a merchant does not offer electronic checks, there is a high risk that the merchant will lose sales to merchants that do accept checks online.

There are simply too many other places a consumer can buy goods and services on the Internet to risk losing a sale due to not offering echecks as an alternative payment option.  The consumer who wants to pay by check will go to a site that lets him do so.

With electronic checks, the consumer provides routing and account numbers  which are converted into an electronic transaction.  The money is direct debited from the consumer’s checking account and deposited to the merchant’s bank account.

Sooner or later checks maydisappear.  That day has not yet arrived though.  Merchants they do not accept payment by check or losing sales.  Smart merchants realize that the more ways they give a consumer to pay for a product the more sales they will make.

Merchants that accept electronic checks realize significant advantages:

• Increase sales.  Providing multiple payment options results in a sales lift for each from each option.  When a merchant offers electronic checks in addition to cards, sales increase by 8-20%
• Decrease processing costs.  ACH processing is much less expensive than card processing costs.  Save 50-75% or more with ACH compared to cards.
• Customer convenience.  Buyers expect to be able to pay with electronic checks.  Consumers have grown used to paying bills via the ACH processing network.  They now expect all merchants to accept electronic check payments.
• Rescue lost orders. If a card order is declined, merchants that electronic checks online can offer the buyer another way to pay.  ACH processing means merchants can save sales that otherwise would be lost.

Other benefits of ACH processing includes reduction of administrative costs, greater productivity, easier bookkeeping, and enhanced security.

The following factors determine ACH electronic check payment processing fees:

• How many transactions will the merchant accept checks online for?  The higher the volume, the lower the ACH processing fees.
• Will the merchant accept checks online for high risk products or services?  Higher risk merchants pay slightly more for ACH processing than low risk merchants.  But ACH will always be less expensive than card processing.
• Underwriting criteria. ACH processing is available for merchants in all industry types.

For companies, ACH payments improves cash flow predictability, builds consumer loyalty, and save time and money. For consumers, ACH payments simplify bill paying and simplifies financial management.

Top Facts About ACH for Bill Payments

1. ACH payments are the electronic transfer of a payment from a consumer’s checking or savings account into the account of the  biller.
2. ACH payments are a smart way to accept all kinds of payments.  ACH payments are ideal for recurring billing, including loan and insurance payments, subscription billing, health club dues, utility and cable bills, and charitable donations. ACH payments can be used for payments that are the same amount all the time and for payments that vary from month to month.
3. ACH payments are reliable, accurate, on time and confidential. Research shows that ACH payments assists consumers save and invest more each month and reduces late payment fees.
4. For billers and non-profits, ACH payments improve cash flow, save time, and enhance customer service and increases customer loyalty.
5. Issues with ACH payments are rare. If a problem ever does occur, it is easy for the biller and the consumer to correct. Under the Federal Reserve Board’s Regulation E, a consumer’s financial institution is required to investigate any ACH payment that the consumer believes to be in error.
6. More than 84% of consumers who use ACH for paying bills say they are very satisfied with it. More and more billers of all types are offering ACH payments as awareness has increased in recent years.